Retail properties in Hong Kong: A rental analysis

Abstract

Purpose - This paper seeks to explore the relationship between market positioning and rents of retail facilities in Hong Kong. Design/methodology/approach - Regression analysis is deployed in the paper to find out the impact of various attributes, in terms of a retail facility's physical characteristics, market positions, and location, on the annualized per-area net rental income. The sample data obtained from the initial public offerings of the Link real estate investment trust (REIT), one of the largest REITs in the world, is used for analysis. Findings - The study finds that district centers command the highest average rental levels, followed by local and estate centers. As the effects of positive externalities for unorganized shops are smaller, the average rental levels for shops are generally lower. In terms of the impact of individual attributes on rents, a retail property's age and its efficiency ratio have negative relationships with rents, while its size (in terms of gross floor area) and the amount of shops positively affect the facility's rental levels. Research limitations/implications - Although obtaining the largest possible dataset in the Link REIT portfolio for the study, the sample is not considered big enough to detect the impact of the location of a retail facility on its rental adjustments. Further studies are required with regard to this issue. Originality/value - The results of this study give planners and developers of retail facilities some insights about the effects of market positioning on a retail facility's performance on the leasing market.